Finance Minister, Matia Kasaija, has declared a 10% interest rate for the National Social Security Fund (NSSF) savers for the Financial year 2022/2023.
The NSSF savers’ interest rate for the 2022/23 financial year has increased by 0.5% from 9.5% the Fund paid to savers in the financial year 2021/2022.
The interest, however, is down by 2.5% from 12.5% that the Fund paid to its savers for the 2020/2021 financial year.
Many had hoped for a lower rate than 10% due to the turmoil in the regional financial markets where the Fund has a substantial amount of investment.
In the last five years, NSSF has paid double digit figures in interest payments only dropping once during COVID-19 pandemic in 2021/22 financial year when the Fund announced a rate of 9.5%.
In 2018/19 financial year, the Fund paid its savers, an interest rate of 11% totaling 978 billion shillings, 10.75% totaling 1.14 trillion shillings in 2019/20 financial year, 12.15% totaling 1.52 trillion shillings in 2020/21 financial year, 9.5% totaling 1.38 trillion in 2021/22 financial year, and 10% totaling 1.591 trillion shillings in 2022/23 financial year.
NSSF invests its members’/ savers’ contributions in a diversified portfolio of assets, including government bonds, corporate bonds, equities and real estate. The income that NSSF generates from these investments is used to pay interest to savers.
In 2013, the Fund made a commitment to pay savers a real annual return, that is, at least two percentage points above the 10-year rate of inflation.
Kasaija said that the 10% interest which is equivalent to 1.591 trillion shillings will be calculated and credited the savers’ Bank accounts.
“In accordance with section 35(2) of the NSSF Act, as amended, I hereby declare the interest rate of 10%. As provided for in the NSSF Act, as amended, this new rate will be calculated and credited to the balance outstanding on the members’ accounts as of 1st July 2022. This new rate equals UGX 1.591 trillion shillings in total,” he said.
“Last financial year, the 10-year average rate of inflation was 4.2%. The rate I have just declared is 5.8% above the 10-year average which means that the Fund has once again delivered on its promise and surpassed it by almost 3.8%, ” he added.
The NSSF Managing Director, Patrick Ayota, reported that the Fund’s assets have grown from 17.26 trillion in the 2021/22 financial year to 18.56 trillion in the 2023/2024 financial year.
In response, Kasaija expressed joy with the Fund’s performance.
“The second KPI I am interested in is the money you generated during the year because that shows the productivity of the investments that I approved during the year. I am therefore glad that the total realized income earned increased by 15 percent from Shs1.9 trillion in the Financial Year 2022/22 to Shs2.2 trillion in the Financial Year 2022/23. This is very commendable given the turmoil in Europe due to the Russia- Ukraine war, investor flight from most of the developing markets back to the US, reduction in value across all East African stock markets and the increased scrutiny that the Fund underwent in the 3rdquarter of the just concluded Financial year,” he said.
The NSSF Board Chairman, Peter Kimbowa, reported that income earned increased by 15% from Shs1.9 trillion in the Financial Year 2021/22 to Shs2.2 trillion in the Financial Year 2022/23.
“Total Realized Income earned increased by 15% from Shs1.9 trillion in the Financial Year 2021/22 to Shs2.2 trillion in the Financial Year 2022/23. Benefits paid to qualifying members increased by 1% from Shs1.189 trillion in the Financial Year 2021/22 to Shs1.199 trillion in the Financial Year 2022/23. The cost-to-income ratio improved from 11.7 percent in the Financial Year 2021/22 to 9.4 percent in the Financial Year 2022/23,” he said.
Stephen Kaboyo – Managing Director, Alpha Capital Partners said NSSF posting 15% increase in its revenues is a big achievement.
“One must acknowledge that the Fund remained resilient. Posting 15% increase in their revenues is not a small achievement by all means. That was good. They have managed to navigate the stormy markets of 2022 to register 10% return,” said Kaboyo.
In the last five years, the NSSF has paid double digit figures in interest payments only dropping once during COVID-19 pandemic in 2021/22 financial year when the Fund announced a rate of 9.2%.
In 2018/19 financial year, the Fund paid its savers, an interest rate of 11% totaling 978 billion shillings, 10.75% totaling 1.14 trillion shillings in 2019/20 financial year, 12.15% totaling 1.52 trillion shillings in 2020/21 financial year, 9.65% totaling 1.38 trillion in 2021/22 financial year, and 10% totaling 1.591 trillion shillings in 2022/23 financial year.
It is worth noting that majority of the social security fund savers at NSSF are the low income earners.
The numbers talk to the most vulnerable being the bedrock of NSSF because those whose savings are below 10 million constitute 83% of the total savings of NSSF.
The Minister of Gender, Labor and Social Development, Betty Amongi called on NSSF management to always be considerate of the low income earners whenever making decisions for the growth of the Fund such as housing for low income savers.
“This group earns on an average a monthly income of 250,000 shillings per month. They are the ones that are the bedrock constituting 83%. Those with savings ranging from 10 million to 50 million constitute 12%. Those with savings in the fund ranging between 50 to 100 million constitute 3%. And those above 100 constitute 2% of the money in the fund,” said Amongi.
“Therefore, whatever decisions we make, we must be considerate to the needs of the majority of the members. If you are investing members’ money on other social protection interventions such as housing, you must balance between targeting high end population with low income earners as a measure for social protection in terms of affordable housing. In many countries, Social Security interventions is used to address inequality and redistribute wealth. Most low income housing built by Social Security funds have addressed low income housing targeting their members. I have therefore advised the board and managers of NSSF to develop a strategy for affordable housing for NSSF members in February,” she added.
In February 2023, President Museveni signed a Bill into an act, introducing voluntary savings and reducing mandatory contributions from five employees to one employee.
Amongi emphasized the need for employers to comply with issuing contracts to all employees since it is in the contract that a provision for deduction of NSSF is embedded.
“I am emphasizing employers to ensure that they deduct and remit contributions of employees and that when they do so they must indicate the names, their account numbers and other details of employers to avoid money of members coming and lying in the suspense account,” she said.